Tax Liability

AAA

DEFINITION of 'Tax Liability'

The total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event's tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance.

INVESTOPEDIA EXPLAINS 'Tax Liability'

A tax liability is a legal claim on assets. Should an entity default on paying its taxes, the governing authority may foreclose on the delinquent account, or take out a lien or encumbrance on an asset.

RELATED TERMS
  1. Substitute Return

    A tax filing that the IRS will create for a taxpayer in order ...
  2. Double Irish With A Dutch Sandwich

    A tax avoidance technique employed by certain large corporations, ...
  3. Notice Of Deficiency

    A letter from the Internal Revenue Service that advises a taxpayer ...
  4. Throwback Rule

    A measure states can adopt to ensure corporations pay state taxes ...
  5. Liability

    A company's legal debts or obligations that arise during the ...
  6. Tax Bracket

    The rate at which an individual is taxed. Tax brackets are set ...
Related Articles
  1. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  2. Saver's Tax Credit: A Retirement Savings ...
    Savings

    Saver's Tax Credit: A Retirement Savings ...

  3. Separately Managed Accounts: A Boon ...
    Mutual Funds & ETFs

    Separately Managed Accounts: A Boon ...

  4. Avoid Capital Gains Tax On Your Home ...
    Taxes

    Avoid Capital Gains Tax On Your Home ...

Hot Definitions
  1. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  2. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  3. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  6. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
Trading Center